Next reveals ‘unnerving’ sales slump

Next has issued a warning this morning that the second half of its financial year could be “tough”.

Results for the Enderby-based retail giant’s first half of the year showed a fall of 0.3% on 2015 – mainly due to a 4% drop in its high street sales.

Next also warned that in the medium term the devaluation of the Pound is likely to affect the cost price of its goods next year by up to 9%.

A statement from the company said: “Based on current exchange rates, we expect our costing rates (the average value of Sterling in the overseas currencies that we buy) to be around 9% worse than 2016/17.”

It continued: “We expect the consumer environment to remain tough for the rest of the year. Quarter three will be particularly challenging as it was our best quarter last year (up +6%), so we are budgeting for full price sales growth in the third quarter to be worse than in the second quarter. ]

“The fourth quarter presents much softer comparable numbers when the problems of an exceptionally warm 2015 winter were compounded by stock availability problems in Directory last year. So there is potentially some upside in the last quarter, particularly if we have a colder winter.”

Analysts have this morning issued dire warnings for retail.

Richard Lim, Chief Executive, Retail Economics said: “These latest figures from Next are simply unnerving and suggest British fashion retailers are facing their toughest challenge in over a decade.

“The wettest June on record, combined with pre-Brexit jitters, have decimated sales growth across the fashion industry. It’s difficult to see the light at the end of the tunnel this year.

“On the one hand retailers are facing seismic structural changes in the way we shop and an undeterred shift towards the experience economy over some physical goods. On the other, rising costs resulting from the collapse in sterling, higher wages through the implementation of the National Living Wage and a weaker economic outlook will all bear down on profitability.”